Not just a pricing engine.
But much has changed in the tech arena since then. Consumers now expect mobile connections with their financial services providers. Increased regulatory requirements also mean lenders must pursue those borrowing prospects in a compliant manner. "Compliance underscores everything we do--and everything a lender does," Huff comments.
New Truth in Lending Act (TILA)-Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure (TRID) forms increase the challenges of achieving accuracy and timeliness on every loan. Maintaining those standards requires mortgage industry vendors--even ones who don't produce disclosures--to adjust their business practices so they can help lenders in today's environment.
"CFPB [the Consumer Financial Protection Bureau] isn't specific about implementation" in all lending scenarios, says Huff. Providing the industry with "low visibility" regarding how to implement TRID means "it will unfold, unfortunately, through the courts and regulators," he believes.
Optimal Blue has a full-time director of fair lending and compliance who serves as a customer resource. Huff explains, "There's a range of how involved lenders are" with compliance details. Part of Optimal Blue's task, he notes, is to educate lenders about what regulators are trying to accomplish with their new rules.
Yet even firms that prioritize these issues soon realize there aren't examples of either business best practices or legal precedents to guide them as they seek to operate in a post-TRID world.
Building systems that enforce compliance lets mortgage firms address regulatory issues consistently. Software also can be tweaked to reflect how management at individual lenders prefers to approach compliance.
For instance, pop-up screens can be added to remind lending staff--from loan officers to closers--when regulatory concerns may be coming into play on a loan file.
Even though Optimal Blue is known primarily for its pricing engine, the firm gains just half of its revenue from that flagship product. Technology designed for secondary marketing, compliance, analytics and consumer-direct combine for the balance of Optimal Blue's sales.
Optimal Blue plans to introduce a pipeline-monitoring service in the fourth quarter of 2015 to help lenders spot instances when changes made to loans after a rate is locked pose compliance risks. Lenders will be informed when they need to issue new disclosures under the TRID rules.
Additionally, they can identify potential disparate-impact situations on an ongoing basis. Disparate impact is a legal concept that maintains that lenders can be held liable for discrimination against classes of borrowers protected under the Fair Housing Act or Equal Credit Opportunity Act without having any specific intent to discriminate. If a neutral lending practice can be shown to disproportionately affect a protected class--such as people of a specific race or national origination--the lender may be sued by the government or a private plaintiff.
Lenders may find after analyzing their applications and turndowns that using credit scores has raised costs for a specific group of borrowers. With the Optimal Blue service, lenders will be able to spot any unintended consequences of their lending practices on a daily basis rather than waiting to view a month-end analysis, Huff says.
Underwriting factors on individual loans and pricing aspects such as no-closing-cost features are taken into account when judging whether a borrower received an appropriate rate, explains Darius. He adds that lenders typically adjust a loan file five times after a rate has been locked. Most of these changes don't mandate new disclosures; however, an updated credit score or appraisal does alter key mortgage elements.
Having accurate information allows lenders to deal confidently with both regulators and secondary market purchasers. Darius believes automation that "gives more clarity" into a lender's operations helps the lender cope with today's vexing business and regulatory matters.
Credit standards also have expanded in recent years, notes Huff, with increased numbers of loan programs available for non-Qualified Mortgage (non-QM) and non-agency mortgages. More-flexible underwriting is encouraged as additional investors compete in the loan marketplace.
Optimal Blue found as recently as 2009 that there were just 20 loan aggregators buying mortgages from smaller firms. Today there are 100 correspondent investors, and a greater number table funding for mortgage brokers.
Optimal Blue customers include 600 lenders that fund their own mortgages--with monthly volumes ranging from $5 million to "multibillions," according to Huff. Another 800 small banks and mortgage brokers originating for others also are clients.
Yet in today's environment, having expanded opportunities for funding loans leads to compliance concerns. Lenders must examine multiple loan programs with numerous investors to ensure "they give consumers the best loan available," says Huff.
Answering that question in a "multi-dimensional" lending environment "is very subjective and very challenging," he adds. But regulators may seek damages if lenders aren't diligent in the effort to find the best loan available for that borrower.
Technology can help lenders handle this challenge. Systems with the capacity to document, for instance, that borrowers requested a specific lender because they preferred to select their servicer can alleviate concerns, Darius points out.
He also believes compliance should be built into tech systems that bring lenders closer to consumers. Borrowers are more engaged than ever in the home-buying process, and software that ensures a compliant workflow gives lenders peace of mind.
Technological change isn't just challenging for lenders. It's also a test for vendors that are trying to develop tools to help clients reduce their origination costs and gain more borrowers.
But producing mobile tools requires more than configuring a website or forms for a smaller screen. Adding mobile capabilities on top of an existing back-office system can be difficult, Darius suggests. "Many lenders want to go faster to mobile than vendors can," agrees Huff.
Consumers typically start looking for a residence to purchase using a mobile device to check out Web portals displaying sale properties. "To get more efficient, you have to get closer to the customer," observes Huff.
However, "there's no roadmap," he adds. "We're constantly iterating around feedback from customers and end users" to develop effective mobile products.
Howard Schneider is a freelance writer based in Ojai, California. He can be reached at email@example.com.
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|Title Annotation:||DEPARTMENTS: TECH TALK|
|Comment:||Not just a pricing engine.(DEPARTMENTS: TECH TALK)|
|Date:||Sep 1, 2015|
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